2008 (10) TMI 143 - AT - Central Excise

Returned goods - modification - Motor received back, then it is dismantled and certain modifications are made and later is cleared again these modification cannot be tread as manufacture stator and rotor were already in the Motor so modification in them would not amounts to manufacture - Once it is considered that the process does not amount to manufacture, then the appellants should pay an amount equal to the credit taken by them

Summary

Issues:
- Appeal against impugned orders involving differential duty on returned goods and re-imported goods under Central Excise Rules.

Analysis:
1. Returned Goods Issue:
The case involves the appellants, manufacturers of Electric Motor, who cleared goods that were later returned under Rule 16 of the Central Excise Rules. The returned goods were dismantled, modified, and then cleared again on payment of duty. The Revenue demanded differential duty, arguing that the modifications did not amount to manufacture. The appellants claimed credit on the returned goods, leading to a dispute over the duty incidence. The Tribunal examined Rule 16, which states that if the process does not amount to manufacture, the manufacturer must pay an amount equal to the credit taken. Relying on the Enfield India Ltd. case, the Tribunal agreed with the Revenue that the modifications did not constitute manufacture as they did not result in a new product. Consequently, the demand for differential duty was upheld, and the appeal was rejected.

2. Re-imported Goods Issue:
In another scenario, the appellants re-imported goods that were originally exported but had to be re-imported due to defects. Countervailing duty was paid upon re-importation, and the appellants claimed credit under Rule 16. Similar to the first case, the goods were dismantled, modified, and cleared again, resulting in a differential duty situation. The Tribunal analyzed the process carried out by the appellants and concurred with the department that the modifications did not amount to manufacture. Despite the appellants' claim for a refund, the Tribunal rejected it, emphasizing that the process undertaken did not create a new product. The penalties were set aside due to the interpretational nature of the issue. Ultimately, the appeals related to the re-imported goods were also rejected.

In conclusion, the Tribunal upheld the Revenue's stance that the modifications carried out by the appellants on the returned and re-imported goods did not constitute manufacture under Rule 16 of the Central Excise Rules. As a result, the differential duty demands were deemed valid, and the appeals filed by the appellants were rejected. The Tribunal highlighted that the modifications made did not result in the creation of a new product, thereby affirming the obligation of the appellants to pay duty equivalent to the credit taken on the goods.